Canadian Dollar attracts fresh buying after touching multi-month low

The Canadian Dollar (CAD) has recently attracted fresh buying interest, following its multi-month low. The USD/CAD pair traded around 1.4250, a slight decrease from its intraday peak of 1.4293 since April 2025. The S&P Global Services Purchasing Managers' Index (PMI) for Canada revised slightly higher to 58.8 in September from the preliminary reading of 58.7.

Meanwhile, the Composite PMI remained steady at 58.4. The ISM Services PMI in the US dropped to 54.9 from 55.4, missing the forecast of 55. The US Dollar Index (DXY) rose to a fresh year-to-date high of 102.20, supported by a drop in the Euro (EUR) due to concerns over France's public finances and political uncertainty in Spain.

Elevated US Treasury yields also bolstered the US Dollar, despite traders lowering expectations for another Federal Reserve interest-rate hike this month following last week's weaker-than-expected US employment report. The US 10-year Treasury yield is near 5.32%, close to last week's peak of 5.34%. However, the rise in yields is not only due to the monetary policy outlook, but also concerns over the US debt burden and broader fiscal position.

Against this backdrop, the Canadian Dollar's recent strength may be due to technical buying and profit-taking, rather than a clear improvement in its fundamental outlook. Analysts suggest that the Bank of Canada (BOC) rate hike expectations might be overly aggressive, leaving the CAD vulnerable to a dovish repricing.